TEMPO.CO, Jakarta - Global oil prices rose again at the end of August 2026 as geopolitical tensions and the risk of supply disruptions continued to unsettle markets.
For Indonesia, movements in global oil prices matter beyond the energy sector. Changes in crude prices can affect fuel costs, inflation, household purchasing power and, ultimately, the government’s budget.
Brent crude was trading at around US$90.41 a barrel on Monday, August 31, as markets assessed potential disruptions to global oil supplies amid geopolitical conflicts and risks to major oil trade routes.
Why Are Global Oil Prices Rising?
One of the main drivers is the growing risk to global oil supplies from geopolitical tensions.
Uncertainty in the Middle East, including potential disruptions to shipping through the Strait of Hormuz, has raised concerns that less oil could reach global markets. The waterway is a major transit route for oil shipments from the Middle East.
Demand, however, is moving in the opposite direction. Reuters reported that global oil demand in 2026 is expected to decline by around 1 million to 1.6 million barrels per day, largely due to weaker oil imports by China.
Even with softer demand, concerns over supply disruptions can push prices higher as traders price in the possibility of tighter global supplies.
Will Higher Oil Prices Automatically Raise Indonesian Fuel Prices?
Not necessarily.
Higher global crude prices do not automatically mean that all fuel prices in Indonesia will rise immediately.
Prices for non-subsidized fuels such as Pertamax are influenced by global crude prices as well as other components used to calculate their economic cost. Pertamina has previously said it continues to monitor global oil prices when determining prices for non-subsidized fuels.
The Energy and Mineral Resources Ministry also calculates the economic price of Pertamax by taking into account procurement costs and other components.
This means higher global oil prices can put upward pressure on non-subsidized fuel prices, but any adjustment ultimately depends on government policy and decisions by fuel suppliers.
What About Pertalite?
Subsidized fuels operate under a different mechanism because their prices are regulated by the government.
The government has previously said it would maintain subsidized fuel prices despite volatility in global oil markets. Finance Minister Purbaya Yudhi Sadewa also said Pertalite would not be increased even if Brent crude returned to around US$100 a barrel.
As a result, global oil price increases are more likely to be reflected in non-subsidized fuel prices than in government-regulated subsidized fuels.
How Could Oil Prices Affect Indonesia’s Energy Costs?
If global oil prices remain elevated, the cost of procuring crude oil and fuel products could also increase.
This is particularly relevant for Indonesia because part of its oil and fuel needs are met through imports. Higher international prices can therefore increase the cost of supplying energy domestically.
Indonesia uses the Indonesian Crude Price (ICP) as an important reference in its oil and gas policies. The ICP stood at US$81.68 a barrel in July 2026, down from US$83.45 in June.
Changes in global oil prices can eventually be reflected in the ICP, although the domestic benchmark is determined through a specific formula and market conditions.
What Does This Mean for the State Budget?
Oil prices can also affect Indonesia’s state budget, or APBN.
When crude prices rise, the government may face greater pressure on energy-related spending, particularly if subsidized fuel prices and energy compensation are maintained.
The 2026 state budget is based on an ICP assumption of US$70 a barrel. If actual oil prices remain significantly above that level, the gap could increase fiscal pressure.
However, the impact on the budget is not determined by oil prices alone. The rupiah exchange rate, domestic fuel consumption, oil and gas revenues, and government subsidy policies also play important roles.
Could Higher Oil Prices Push Up Inflation?
Yes. Higher oil prices can contribute to inflation if they lead to higher fuel prices and transportation costs.
More expensive fuel can raise the cost of transporting and distributing goods, potentially pushing up prices for food, consumer products and other goods and services.
Businesses can also face higher operating and production costs, particularly those that rely heavily on vehicles, machinery or fuel.
The longer global oil prices remain elevated, the greater the potential for these higher costs to spread through the economy.
Why Does Indonesia Need to Watch Oil Prices?
The latest rise in global oil prices shows how geopolitical developments can quickly affect energy markets.
For Indonesia, the impact depends on how long prices remain elevated and how global crude prices translate into domestic fuel costs, inflation and government spending.
A rise in global oil prices therefore does not automatically mean higher prices for all Indonesian fuels. But if elevated prices persist, they could create broader pressure on household spending, business costs and the government’s fiscal position.
